Macro 20

2. Macroeconomics

3. Opening
Prayer

4. Quiz Master

5. Quiz
1.What are the four cases for Free Trade?
2.What is the best case for Protectionism
and why?

7. Quantity
Price
$1,000
Steel
$1,500
Increase local
production
Price of steel
increases
Hire local
employees
With 50%
Tariff
World
Supply
Domestic
Supply
Local 2 Foreign 4
Local 3 Foreign 2
6
5
4
3
2
1
0 7

9. Demand
Quantity
Price
Supply
$30,000
500
Cars
450
$30,300
50 fewer cars
Price of steel
increases
Layoff employees
Lower Pro
fi
ts

10. Save 1 steel job
Lose 23 car jobs
Trump Math
+600
-14,000
-13,400
=

13. Jones Act
Adds $1,800 a year to costs for
average family

15. Chapter 20
International Finance

16. 100+ Currencies
https://www.tradingview.com/markets/currencies/cross-rates-overview-prices/

17. one
unit
of
this
will buy ___ units of that

18. https://www.tradingview.com/markets/currencies/cross-rates-overview-prices/

19. Why buy Dollars?
Buy American Stuff
Invest in America
Trade for other currencies
Hold and Hope

20. Demand
Dollars
Yuan
Per Dollar
Supply
Higher U.S.
Interest
Rate
6.44
6.50
Depreciating
Cost more to
buy a dollar
Losing
Value

21. Demand
Dollars
Yuan
Per Dollar
Supply
Lower U.S.
Interest
Rate
6.44
6.25
Appreciating
Cost Less to
buy a Dollar
Gaining
Value

22. Big Mac Index

23. Big Mac Index
Country Currency Price Rate Dollars
Phillipines Peso 140 0.019 $2.66
Vietnam Dong 65,000 0.000043 $2.80
China Yuan 20.50 0.15 $3.08
Saudi Arabia Riyal 12 0.265 $3.18
Switzerland Franc 6.5 1.0 $6.50

24. Arbitrage
Buy low and sell high
Buy here and sell there
Buy today and sell tomorrow

25. Arbitrage
Are the price differences
different than the exchange
rate?
If so, buy low and sell high

26. The Law of One
Price
Arbitrage closes price gaps
Bid up the low price - Demand
Bid down the high price -
Supply

27. 1.00 Dollar to 6.92 Yuan
USD to CNY
$ to ¥
$ 5.00
x
6.92
=
¥ 34.60
¥ 30.00
÷
6.92
=
$ 4.34

28. $ 5.00
$ 4.34 increase demand
increase supply
$ 4.67 one price
Price Arbitrage
Arbitragers

29. Arbitraging
1. Pick a product and review the prices in both countries
2. Are the prices different than the exchange rates?
3. Buy currency in the low priced country
4. Buy the product in the low priced country
5. Move to the high priced country
6. Sell in the high priced country

31. 1.00 Dollar to 51.91 Peso
USD to PHP
$ to ₱
$ 50.00
x
51.91
=
₱ 2,595
₱ 1,973
÷
51.91
=
$ 38.00

32. $38
$40 $40
Supply
More Supply
Demand
More
Demand
Price
Quantity
Price
Quantity
Demand
Supply
$50
₱ 1,973

33. Cost?
Arbitraging
1. Traded $38 for ₱ 1,973
2. Bought shoes for ₱ 1,973
3. Shipped to U.S.
4. Sold in U.S. for $50
5. Traded $38 for $50
6. Made $12 on $38
7. Made 31 percent profit
8. Repeat

34. 1. Dollar to Won (KRW) rate is 1 to 1,176
2. Cell Phone in U.S. is $600
3. Same Cell Phone in South Korea is 600,000
4. Cost to ship is $5
5. What should you do and how much will you
make? Dollars and percent?